Need advice on financing a home in need of complete renovation

mrabody

I have some questions on what steps I will need to take in order to successfully arrange financing on a house requiring full renovation.

The house in question is a two bedroom mid-terrace bungalow that I think would date from the 1930s. In short it needs a complete renovation and is currently uninhabitable. It appears to be structurally sound, and the wood floors, and plaster all appear to be serviceable, but it needs complete rewiring and a new kitchen and bathroom etc. The seller does have planning permission for a 5x4 metre extension on the back. It was listed for around £177,000, but as soon as I had gone to look at it the price rose to £183,000 on the Estate Agent’s website. When I viewed it, the Estate Agent told me that they it had sold previously, but that the deal had fallen through.

I checked https://www.nethouseprices.com and discovered that this property “sold” for £152,500 in October, which I think would confirm what the Estate Agent had told me about the previous deal having fallen through. I also compared prices of other houses on the same close and the main road off of which it leads. Most of the houses on the close appear somewhat run down and have sold for between £165,000 and 175,000. However, the houses on the main road which are of the exact same design and age, but which tend to be better kept are selling for more, between £180,000 and £235,000. Anther house on the close, which appears to have been fixed up was for sale for £207,000 and is under offer. The house we are looking at would likely be worth more then that one as it benefits from a much larger, south facing garden, and a very large garage/workshop. I think that renovated, and with the grounds done, it should be worth around £200,000 or a little more. In any event we would be living in the house for a few years at least, not looking to sell it immediately and make a quick profit.

What is likely to be a problem, is financing the purchase. From what I have been told, it will be difficult to get a mortgage to purchase a house like this. I have been told that for a lender to agree to finance the purchase of this house, my wife and I would need to have all the money set aside for the renovations, all the materials purchased, and a detailed plan and schedule for the renovations (ie the various tradesmen lined up). Presumably we would need a rather large deposit as well.

I think we should be able to meet all these criteria. I think we have access to funds through family, and by drawing on the capital of my wife’s home in Australia. I know of a tradesman who can do much of the work, and can no doubt recommend others for different parts of the job. I’m also quite handy and would be able to do some of the work myself. I’ve looked into the price of double glazed windows, flooring, toilets etc on ebay and feel confident that I could purchase much of required materials very cheaply and have them on hand in order to show the lender that I am ready to proceed.

What are my chances of being able to arrange financing, and what would the likely conditions of the financing be? My wife and I have a combined income of about £65,000 per year so we would be looking to borrow quite a bit less than our likely maximum. I think the house has been on the market for some time, and given the difficulty a buyer is likely to have in raising financing, I think that the seller will be somewhat flexible on the price. I was thinking of making a cheeky offer of £149,000 bearing in mind the previous “sale” at £152,500 with a view to settling on a price of between £155,000 and £160,000. I expect the extension would cost approximately £20,000 to build, and I’ve budgeted another £10,000 to fit the kitchen, bathroom, and rewire the house, which given that I can do some work myself may be somewhat high. I expect that it would be wise to set aside an extra £5000 as a contingency fund, should anything go pear-shaped. Based on my above calculations and the amount of money set aside, would a lender be prepared to provide to us in these circumstances? And how much of a deposit would they require on the property?

Also, does anyone know if there are specialist lenders out there who do provide mortgages in situations like this?

welshgranny

Hi my friend. I have been searching the forums as I am asking the same question myself. We have inherited an uninhabitable terraced house and do not know where to find funding for the renovation. If you have found the answer Please Please could you share it.
carol

Magentasue

In what way(s) is the house uninhabitable?

cazmanian_minx

The Ecology Building Society will lend on most things (even a heap of stones in a field!) but they have quite stringent criteria and the interest rates are pretty high.

Caz